401(k) Retirement Plans
Solo Owner 401(k) Plans
Also called Solo 401(k) and Owner K. A Solo 401(k) is a qualified retirement plan for Americans that was designed specifically for employers with no employees other than the business owner and their spouse. In 2023 the maximum each owner can contribute is based upon their age and earned taxable income. If the owner is less than 50 years of age during the year, that owner can contribute a maximum of $22,500 as their employee ‘deferral’ contribution deducted from their paycheck or earned taxable income. If they are 50 years of age or older, the maximum employee deferral which can be deducted from their earned income is $30,000. These contributions can be either pre-tax, after-tax (ROTH) contributions or a combination of both as long as the total deferral amount does not exceed the maximums listed above. When an employer or company contribution is added to the deferral amounts, the maximum anyone can contribute into a 401(k) is $66,000 (if the owner is less than 50 years of age) or $73,500 if they are 50 years of age or older. This is maximum amount is calculated as follows: total deferral amount + up to 25% of earned taxable income up to maximum limit allowed as stated above.) In conclusion, each owner must declare enough earned taxable income during the year to accomplish the maximum contribution amounts.
Pension Planning specializes in helping business owners achieve their own retirement plan goals.
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Small and Large Employer 401(k) Plans
Employers today find the need to sponsor a 401(k) plan in order to:
1) help owners/partners/shareholders and employees save for future retirement needs;
2) retain current employees;
3) entice prospective employees to join their company; and
4) as an effective way to help the company reduce corporate taxes.
Employees and job applicants often look for valuable benefits when choosing an employer and many ask if the company has a 401(k) plan when applying for a position. Employers often overlook the tax savings benefits which can be attained with an effective retirement plan strategy.
Employees at Pension Planning specialize in helping employers design and maintain the best type of retirement plan structure to fulfill their goals. There are many ways to design a 401(k) plan.
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All Types of 401(k) Safe Harbor Plans
A Safe Harbor 401(k) Plan is a type of 401(k) with a designated mandatory employer contribution which allows the owner(s) and other highly compensated employees to avoid most annual compliance tests. If a 401(k) includes a Safe Harbor provision, the employer (also called the plan sponsor) makes tax deductible contributions on the behalf of eligible employees and those contributions are typically 100% vested. Safe Harbor 401(k) plans are the most popular type of 401(k) used by small businesses today. Unlike a traditional 401(k) plan, they automatically pass the ADP/ACP and top-heavy nondiscrimination tests. This assures the owners and highly paid employees who made at least $135,000 in 2022 (This number increased to $150,000 in 2023.) to contribute the maximum employee deferral contribution. Most people are not aware there are at least 10 different types of Safe Harbor plans. How do you know which Safe Harbor Plan works best for your company? At PPC our plan consultants explain the various Safe Harbor plans and will create illustrations modeling different plan contributions specifically for your company’s needs.
How do you know which Safe Harbor Plan works best for your company? For more information, please email our consultants at Send Email
At PPC our plan consultants explain the various Safe Harbor plans and will create illustrations modeling different plan contributions specifically for your company’s needs.